How Stimulus Spending Ruined Buffalo -- Lessons for Honolulu

Recently Steven Manlanga of the Manhattan Institute authored "How Stimulus Spending Ruined Buffalo" in the Wall Street Journal. It describes that stimulus was the vehicle for ruining Buffalo, New York and at the core of this stimulus was none other but a light rail system:

• In his State of the State Address this month, New York Gov. Andrew Cuomo announced $1 billion in incentives to attract new investment. Too bad Mr. Cuomo ignores the factors that help keep areas like Buffalo inhospitable to new investment—namely steep tax rates and the high cost of government.
• Sometimes these schemes have done real harm. In the 1970s, the federal government decided to invest $530 million to build a 6.2-mile light-rail system through downtown Buffalo. It was supposed to further spur redevelopment.
• Opened in 1985 and anchored by a transit mall that banned cars, the rail line fell well below ridership projections—and downtown businesses suffered mightily from the lack of traffic. As Buffalo landlord Stephen P. Fitzmaurice wrote in 2009: "Walk down Main Street on the transit mall; aside from a few necessities like drug and cell phone stores, blight dominates." Last month the city received a $15 million federal grant to restore traffic to Main Street.
• These massive investment subsidies failed partly because officials were ill-suited to select the right projects and often instead gave money to favored insiders. Even former Mayor Anthony Masiello described the federal government's redevelopment funds as "a politically motivated system trying to please everybody."
• Image: Main Street in Buffalo: Emptied of traffic and stores by a light-rail infrastructure stimulus project in the 1980s.

Lesson 1: Factors that help keep areas like Honolulu inhospitable to new investment—namely steep tax rates and the high cost of government.

Lesson 2: Rail systems are planned as reasons to spur development. They do not. Quite the opposite they produce blight which cost even more money to reverse.

Lesson 3: Yet another rail line where projected rail ridership was a myth ( a lie.)

Lesson 4: Clueless politicians (i.e., Hannemann, Carlisle, Calwell) and appointed boards (HART) are “ill-suited to select the right projects and often instead gave money to favored insiders” (Mr. Malanga refers to pay-to-play politics which are prominent in Hawaii.)

Did You Ever Think that Honolulu Rail Will Turn ... Sexual?

Rail pimping university economics professor appears to be a real life pimp!

Serious City Mayor: Assessment, Priorities, Solutions, Policies(Tulsa)

Tulsa: Open for Business -- Tackling city's challenges requires willingness to embrace innovation, competition and market ideas. By Dewey Bartlett, Jr. Mayor of Tulsa, Oklahoma

This is an excellent article that summarizes how to run a city under financial distress. (Aren't they all?)

I quote this passage:
Water/Wastewater Study: As a result of the KPMG recommendations, the local public utility authority issued an RFP and engaged Infrastructure Management Group, a nationally recognized team of public infrastructure efficiency experts, to review the governance, operations, finances and strategy of Tulsa’s entire utility operations.

And I note that the highly reputed IMG quoted above conducted the Honolulu Rail financial report for Gov. Lingle, issued in December 2009. The report said that the likely minimum cost to build the elevated rail would be $7.2 Billion as opposed to City's $5.3 Billion estimate.

Demographia's W. Cox on Honolulu Infrastructure

Wendell Cox of St. Louis based Demographia.com made an interesting presentation at the 36th annual Business and Investment Conference organized by Smart Business Hawaii at the Ala Moana Hotel on January 11. Link to Cox's 1/11/12 slideshow.

Some of his important findings and suggestions include:

• Honolulu lost 50,000 residents between 2000 and 2009 in terms of domestic migration. Its taxes, jobs, congestion, housing prices, etc. have caused a loss of domestic residents to other Hawaii counties or other states.
• Hawaii was 8th highest in taxation in 2009 in the U.S.
• Honolulu housing affordability was the worst in the U.S., about three times worse that the US average!
• From the U.S., only Los Angeles and Honolulu are included in the 25 most congested cities in the world.
• Several other cities in the US have gone bankrupt and Honolulu is racing to bankruptcy with multi-billion dollar liabilities (pensions, sewers, rail, etc.)
• Politicians are ignorant of the fast approaching demographic time bomb of Baby Boomers who are switching from taxable paychecks to pensions and healthcare.
• Honolulu rail ridership projections are "rosy."
• Cautions about the rail's budget "You Won’t Know the Bill Until It’s Too Late"

Follow the Money... Follow the Loop ...

Urban Rail and Terrorism

The recent article "For Transit Agencies, Terrorists Are Moving Targets" in the magazine of the New Jersey Transportation Planning Authority raises many critical issues relating to the security of urban rail systems.

• Security experts and transit officials alike all but guarantee that some intentional tragedy will, sooner or later, befall the transit infrastructure of a major American city.
• al Qaeda and other terrorist organizations have also struck mass transit. Since 2011, bombings have taken place on transit systems in Mumbai (2002, 2003 and 2006), Madrid (2004), Moscow (2004 and 2010) and London (2005).
• According to the Mineta Transportation Institute (MTI) Data Base of Terrorists Attacks against Public Surface Transportation, over 4,000 people were killed in 1,434 attacks between 2004 and 2010.
• Transit infrastructure by its very nature presents a ripe target, terror experts say. While airline passengers have to go so far as to take off their shoes and submit to controversial full-body scans, transit passengers move freely through portals like ghosts. And what passengers can do, so can couriers of bombs, nerve gas and anthrax.
• To combat everyday crime, such as theft, that takes place on their systems, transit agencies have long maintained their own police forces, or contracted out to other law agencies.
• Regardless of the money that Washington, D.C., does not provide, transit officials say that vigilance is their most important resource. Waiting for a threat that may never emerge—scanning subway platforms day-in, and day-out—can, however, be a mind-numbing task.

The bottom line is that:

(1) FTA does not provide funds for security,

(2) Substantial funds are necessary just to combat groping, pickpocketing and other petty crime, and,

(3) Rail transit security is nearly impossible to accomplish at any level comparable to aviation, but the cost for it is very high given the number of stations and passengers (and potential criminals and terrorists) that utilize the rail systems.

In the picture below from LA's Gold Line rail one can see six security officers (that is, six salaries and benefits) and no passengers!

Privacy Issues Survey -- The Economist and Hawaii Results

I like people, global and local issues, and numbers ... so I present a mini-series of surveys on major issues which have been debated at The Economist. I recommend that you visit their site and learn more if the issue presented is of interest to you.

I selected blocks of questions on Privacy, Economy, Technology, Energy and U.S. Politics. I used my several thousand contacts and Internet friends as well as SurveyMonkey to conduct surveys and solicit responses from Hawaii. Both my and The Economist surveys are based on "self selected" respondents so the results may provide trends or indications but they are not scientific.

Obviously the results only represent people with at least a basic level of computer and Internet savvy. However, the results may be sufficiently indicative because most questions along with the careful wording of questions lead to straightforward answer: Agree, Disagree or Do Not Know. The Economist has received a few thousand responses to each of their questions. I post results only when Hawaii surveys exceed 100 responses.

Privacy Issues Survey (click to take the survey)

I grouped four of The Economist questions into a privacy issues survey, as follows:

• DNA sequence is a person's business, and nobody else's.
• Loss of privacy from digitizing health care will be more than compensated by increased efficiency.
• Cloud computing can't be trusted.
• Government must do far more to protect online privacy.

The results are summarized below.


The immediate observation is that Hawaii responses are more agreeable than The Economist responses. The graph shows that both Hawaii and The Economist responses trend in the same way. By a large margin, Hawaii respondents prefer high levels of privacy for a person's DNA and for online transactions.

Public Apathy "Promotes" Boondoggles. Another H-3? The Obama Effect on the Rail Vote

PUBLIC APATHY. It is one of the major boosters of the ridiculous Honolulu rail, according to award winning journalist and author John Fund of the Wall Street Journal. He spoke about it yesterday at the 36th annual Business and Investment Conference organized by Smart Business Hawaii at the Ala Moana Hotel.

Cost is ridiculous, environmental impact is horrendous and federal monies are no more. Yet Honolulu rail rolls along. Why?

Because too few local citizens participate in protests, contact and pressure elected officials, contribute money and time, etc., etc. He also acknowledged that in most cases major successes are achieved by a few, so those of us really working on stopping the rail are not the exception.

So, I say, if rail happens Abe Lincoln will be correct one more time. In a moment of disappointment Abe said "People get who (or what) they deserve."

ANOTHER H-3? John also quoted past Mayor Mufi Hannemann who after the marginal 50.6% "yes to steel on steel rail" vote proclaimed that "this is not going to be another H-3." Yet as you know from my previous posts the cost of rail was predicted in late 2010 to be at least 40% higher compared with the cost estimates during 2008 campaign. Project construction is 3.5 years late.

Rail has already faced one lawsuit in state court on Hawaiian issues and is facing a major one in federal court for NEPA violations. But this is only the beginning. There will be lawsuits for illegal agricultural land conversions and usage. Noise impacts in the proximity of HUD financed homes and apartments because rail noise violates HUD night time noise levels. A challenge for the misuse of TheBus funds to sore-up TheRail finances is also in consideration. And of course dozens of eminent domain lawsuits.

H-3 was built in the middle of nowhere, whereas rail steps on the toes of thousands of citizens. We have not seen anything yet in terms of legal challenges.

THE 2008 ELECTIONS OBAMA EFFECT ON RAIL. John Fund provided statistical evidence that in the 2008 election "island son" presidential candidate Barrack Obama drew thousands of new voters in the polls particularly younger ones who overwhelmingly voted in favor of rail. (I add that I have noted this attitude in young people. Rail is a government project for their future which will cost them next to nothing because it is the government's monies and not theirs...) John argued that if there was a more typical election without the prominent "Obama effect" in the local polls, the rail question would have been a solid No.

Survival of the Unfittest: Why the Worst Infrastructure Gets Built

The worst infrastructure gets built! This is the concise conclusion of analysis by Oxford University professor Bent Flybjerg who for many years has been emphasizing the pitfalls of "megaprojects" which typically turn out to:

• be much more costly than predicted before construction started
• provide fewer benefits that planners predicted, and
• attain a 50% lower ridership than predicted, for urban rail systems

Dr. Flybjerg attributes this to several factors, many of which are prevalent in the proposed Honolulu rail megaproject, as shown below, followed by my assessment from * meaning "not so much in Honolulu rail " to ***** "spot on for Honolulu rail":

• Such projects are inherently risky owing to long planning horizons and complex interfaces. (***** Honolulu rail is all elevated, heavy rail in the middle of vital arterial streets of a a crowded city with cultural, historical and soils issues)
  
• Technology and design are often non-standard. (** Honolulu rail is heavy rail guideway with light rail automatic trains by Ansaldo)
  
• Decision-making, planning, and management are typically multi-actor processes with
• conflicting interests. (**** Honolulu rail is heavily political project built as a city project in the middle of state highways with political push from Senator Inouye in Washington DC.)
  
• Often there is ‘lock in’ or ‘capture’ of a certain project concept at an early stage, leaving analysis of alternatives weak or absent. (***** This is exactly why the NEPA-based lawsuit was filled in federal court. Mufi Hannemann took office in Jan. 2005 and by late fall 2006 the ~100 page Alternatives Analysis had selected elevated rail as the "winner".)
  
• The project scope or ambition level will typically change significantly over time. (**** Honolulu rail started as a 34 mile proposal for about $4 Billion and right before construction it is a 20-mile $5.2 Billion project that excludes Kapolei town, Waikiki and UH-Manoa!)
  
• Statistical evidence shows that such unplanned events are often unaccounted for, leaving budget and time contingencies sorely inadequate. (*** Honolulu rail will be subjected to many changes as eminent domain lawsuits begin once construction starts.)
  
• As a consequence, misinformation about costs, benefits, and risks is the norm throughout project development and decision-making, including in the business case. (**** Even pro-rail local newspapers and City Council members gripe about the lack of transparency and the ever evolving changes in costs.)
  
• The result is cost overruns and/or benefit shortfalls during project implementation. (***** If built, Honolulu rail's ultimate result will be a 50% cost overrun and a 50% ridership attainment, at best.)
  

LINK to the full article Survival of the unfittest: why the worst infrastructure gets built—and what we can do about it by Bent Flyvbjerg. Sa¨ıd Business School, University of Oxford, e-mail: bent.flyvbjerg@sbs.ox.ac.uk. Part of the research for this paper was carried out while the author was professor at Aalborg University, Denmark, and Delft University of Technology, the Netherlands.

Large Unions and Massive Labor Laws Lead to Fewer Jobs

France is a prime example of having large and powerful unions, a 3,300-page Labor Law and employee payroll taxation at 39%. The result of all this is more automation and fewer jobs.

In the late 1990s Paris totally retrofitted metro line 14 which today carries 725,000 passengers a day. It is totally automated and the computerized trains run much closer to each other.

Self checkout has proliferated and continues to gain ground in countries where labor is expensive. Other examples from France include:

• Orders at many McDonald's are taken via touchscreen devices.
• Transit services operate with smart cards
  
• Self-serve car washing Elephant Bleu has grown to 472 stations

One result is that France is a leader in the creation and adoption of automation. Another is that unemployment rarely drops below 10%. More details in The Economist's Driverless, Workless article.

Honolulu Rail 2011 Summary

In 2004 I started keeping tabs on major events of the infamous Honolulu Rail. This link takes you to the 2004 to 2010 highlights. The 2011 highlights are below.

January 18: FTA issues Record of Decision. The ROD allows the city to take these actions if it so chooses (but read the statement after the list):

• the acquisition of any real property or real property rights identified in the Final EIS or ROD as needed for the Project;
• the relocation of persons and businesses on that property;
• the relocation of the Banana Patch community, if it so desires, in accordance with the ROD;
• the relocation of utilities affected by the Project; and
• the acquisition of rail vehicles for the Project.

This pre-award authorization is not a real or implied commitment by FTA to provide any funding for the Project or any element of the Project. However, if FTA were to provide grant funding for the Project, the cost of the actions listed above, performed after RAMP approval, would be eligible expenses. No other Project action has pre-award authorization at this time." [Underlined in the original].

January 31: The Native Hawaiian Legal Corporation filed a lawsuit Monday afternoon in Honolulu Circuit Court to stop construction of the city's $5.5 billion rail project.
"The complaint filed by Paulette Ka'anohiokalani Kaleikini claims both the city and state failed to perform a complete archeological survey of native Hawaiian remains, or iwi, along the entire 20 mile rail line as required by state law. Kaleikini is being represented by the Native Hawaiian Legal Corporation, a non-profit group dedicated to preserving the indigenous people."

February 4: The University of Hawaii Economic Research Organization released a Brief titled, "Honolulu rail Transit: Do the Benefits Justify the Costs?" Their conclusion was that, "Preliminary considerations suggest a high degree of uncertainty about whether the benefits of rail justify the costs. As the conversation about rail costs advances, we should continue to consider the relative size of the benefits."

February 16: "FTA Administrator Peter Rogoff said Tuesday the City and County of Honolulu’s revised financial plan for rail transit must be more robust and not compromise public bus service. "We need to see a financial plan that shows that they have not only the funding to meet their obligations above the federal commitment (but) they also need to demonstrate to us that they have sufficient resources to keep the existing bus service operating and well maintained,” said Rogoff, during a nationwide conference call with reporters. “In the most recent financial plan submitted to the FTA in September of 2009, the city uses of $300 million in federal bus subsidies to fund construction of the $5.5 billion elevated rail system.”

The city's current financial plan for funding rail construction shows it will use $1.5 billion in federal New Starts funds, $300 million from the federal bus funds, and $3.5 billion from the additional ½ percent GE tax. As of the end of 2011 a "robust" financial plan is unavailable.

February 22: City has a "ceremonial groundbreaking", not a groundbreaking ceremony in the middle of nowhere along the North-South Road.

March 22: Ansaldo Honolulu wins the bid to build the city transit cars for $574 million, and will also operate and maintain the system. See below a quick summary of the bids. Phase 1 is called Design-Build (DB) and phase 2 is called Operation and Maintenance (OM)

------- Ansaldo---------Bombardier------ Phase
----$573,782,793----$697,263,592-------1, DB
----$506,030,806----$262,717,960-------2, OM
--$1,079,813,599----$959,981,552-------Total build and 15 years of operation

For Phase 1 Ansaldo is $125 Million less than Bombardier, but in total Bombardier is $125 Million less than Ansaldo, and Ansaldo won! (Honolulu math....)

May 14: Complaint (LAWSUIT) filed against against the U.S. Secretary of Transportation, various executives of the Federal Transit Administration, and the City Transportation Director:

• Count 1: defining the purpose and need so narrowly as to preclude consideration of all reasonable alternatives
• Count 2: failure to consider all reasonable alternatives (NEPA)
• Count 3: failure properly to analyze the environmental consequences of alternatives (NEPA)
• Count 4: improper segmentation (NEPA)
• Count 5: failure to identify and evaluate use of native Hawaiian burials and traditional cultural properties (section 4(f))
• Count 6: arbitrary and capricious evaluation of the project’s use of section 4(f) resources
• Count 7: improper project approval (section 4(f))
• Count 8: failure to account for effects on historic properties (NEPA)

July 14: Rail contract appeals set for Sumitomo, Bombardier

July 16: Honolulu Magazine publishes critical article on rail

August 15: HART Board set-- Eight of the ten-person “apolitical” and rail-clueless HART board consists of six current and former City employees and two union officials. The minority two are businesspeople. Also, Bombardier appeals to FTA in Honolulu rail dispute. And Sumitomo--Losing bidder on Honolulu rail project goes to HART of the matter.

August 21: How the city misled the public. By Walter Heen, Benjamin Cayetano, Cliff Slater and Randall Roth.

August 24: Closer look shows why Sumitomo may have decided against Honolulu rail appeal

August 27: Pacific Business News reverses position to now oppose rail.

September 13: Bombardier loses latest appeal of Honolulu rail contract

October 14: Bombardier files new appeal of Honolulu rail contract

October 21: Ansaldo, State Reach Deal on Licensing Violation
Ansaldo Honolulu JV has agreed to pay the state $150,000 to settle two cases alleging that the company didn't have a contractor's license. Submitting a bid without a contractor’s license constitutes unlicensed contracting. The fine for unlicensed contracting activity ranges from $2,500 and can run as high as 40% of the total contract price.

October 26, 2011: Ansaldo penalty 'slap on the wrist,' councilman says
City Councilman Tom Berg, a critic of the selection of rail car contractor Ansaldo Honolulu, said the city should have disqualified the Italian-based company because it was in violation of state law by bidding for the project before obtaining a contractor's license.

November 23: Pro-rail Star Advertiser editorial tells HART "Honolulu's contract with a subsidiary of an Italian conglomerate to design, build and operate the city's rail transit project was scheduled to be signed next Friday, but a delay is needed to reassess what increasingly looks as shaky as the euro." And "In our 100 year history The Outdoor Circle (TOC) has seen no other venture that holds the potential to degrade the landscape of Oahu as the proposed Honolulu Rail Transit project. TOC has been involved in virtually every step of the project from the moment it was first brought to the public for discussion. For more than five years, at every opportunity, we have urged the City to explain how it will mitigate Transit’s horrific visual damage to this island as well as the degradation to neighborhoods and communities along the route of this six billion dollar project."

November 28, 2011: Why Does Carlisle / Hamayasu / Horner Stick with Ansaldo while Under so Much Fire?

November 29, 2011: The Honolulu Authority for Rapid Transportation signed a $1.4 billion contract Monday with Ansaldo Honolulu JV, giving it the go-ahead to start construction on the system’s cars and other key components. There will be no guideway and rails for at least another 5 years. So why did we order trains?

December 12: Senior Federal Judge A. Wallace Tashima denied the City/FTA Motion to a) dismiss certain of the plaintiffs for lack of standing, and b) the plaintiffs did not identify certain historical sites during the environmental process. The lawsuit is definitely GO!

December 18: Bidding Irregularity and Delays Imperil Honolulu Rail Insurance Program
"A program that was supposed to reduce insurance costs for the Honolulu rail transit project by $20 million has been indefinitely delayed after irregularities in the city purchasing process forced the city to cancel a key contract award. "

December 29: FTA grants HART permission to enter the Final Design phase but has many difficulties with HART's financial plan. The FTA asks HART to the State legislature and the City Council to get an unspecified extension of the ½ percent General Excise Tax increase or find other monies ... "these revenue sources require actions by the State of Hawaii and/or the City that have not been taken and which are beyond HART's ability to control. In addition, "HART made assumptions in three areas that require justification."

The figure below is an exact copy of the City's mid-2008 Draft EIS. The blue dashed line is my addition that shows that the project is late by 3.5 years well before any actual construction has started!

US: Gas v. Wind -- Hawaii: Geothermal v. Wind

Matt Ridley concludes his article Gas Against Wind as follows:

To persist with a policy of pursuing subsidized renewable energy in the midst of a terrible recession, at a time when vast reserves of cheap low-carbon gas have suddenly become available is so perverse it borders on the insane. Nothing but bureaucratic inertia and vested interest can explain it.

Like the U.S. mainland has abundant gas Hawaii has abundant geothermal energy. Tapping into geothermal power can be more expensive than hydraulic fracturing or fracking for natural gas but geothermal power in Hawaii is less exhaustible than natural gas on the mainland, and once developed its use does not produce greenhouse gasses.

Like in the U.S. natural gas is in shale hundreds of miles away from big metropolitan areas, but a national grid makes electric power transmission feasible, although billions need to be spent to the existing grid if gigawatts are to be transmitted efficiently and reliably.

In Hawaii a cable to connect Oahu, Maui and the Big island may be too expensive, but there are alternatives: Hydrogen, and Ammonia (as a carrier of Hydrogen.) Hawaii can utilize abundant geothermal energy to transform into a hydrogen/electric economy for long term sustainability, instead of blowing Billions in the wind.

In addition to blowing Billions on unreliable power production, I quote from Ridley's article: The wind farm requires eight tonnes of an element called neodymium, which is produced only in Inner Mongolia, by boiling ores in acid leaving lakes of radioactive tailings so toxic no creature goes near them.

California Rail Boondoggle

Outside Hawaii infrastructure boondoggles are called what they are... boondoggles. Hawaii is too insular and managed by an inner political cast of characters. As a result lies and misrepresentations prevail at all government levels when it comes to billion dollar issues such as Rail, Wind (and other suspicious Renewables), Government Pensions, and Employee Health Coverage.

I quote a brief article from the Wall Street Journal below. Note that:

1. Congress will ask tough questions about rail projects
   
2. Congress will refuse to fund billion dollar shares for rail projects
   
3. California's fast rail at over $100 Billion comes to $2,700 per person
   
4. Hawaii's elevated rail at over $7 Billion(*) comes to $7,600 per person
   

(*) You do not believe the Mufi / Carlisle / Toru / Horner / PB co$t e$timates, do you? They are of the same quality as their ridership estimates shown below:




Bullet Train Boondoggle

The House Transportation and Infrastructure Committee put California's high-speed rail plan on trial last week, asking rail experts and local officials some questions that the project's planners and state lawmakers apparently failed to consider. Like how the state will finance its 500-mile bullet train from Anaheim to San Francisco.

California voters approved a $10 billion bond initiative to fund the project in 2008. At the time, the state's high-speed rail authority, which is responsible for planning the project, estimated that the train would cost only $33 billion and be financed primarily by the federal government and private sector. The authority also promised that the train wouldn't require a subsidy. However, a few months ago the authority released a revised business plan that estimates the rail will cost between $98 billion and $116 billion. The authority expects the federal government to put up $73 billion and the private sector to invest $10 billion. Jerry Brown, the state's Democratic governor, praised the new plan as more "honest."

Investors have refused to finance the bullet train without a subsidy, and Congress isn't appropriating any more money for high-speed rail. Of the $11 billion that Congress has already appropriated, the Obama administration has authorized $3.9 billion for the California project on the condition that the state build the first segment in the Central Valley, presumably because there's less resistance to the train in rural areas than big cities. That may be true, but the train's a losing proposition everywhere. According to a new Field poll, two-thirds of Californians want a referendum on the project. And by a 2-to-1 margin, they'd vote to kill it.

Greg Gatzka, director of the King County Community Development Agency, testified at the hearing that the train would result in "approximately 7,100 acres of severed and/or disrupted" farmland and cost the dairy industry $50 million. It would also interfere with a $67 million broadband infrastructure project. Kings County has sued the rail authority because of the numerous disturbances, as have the cities of Palo Alto and Palmdale.

Even if the rail authority were to settle these legal challenges, a high-speed train wouldn't be operable until the state comes up with an additional $25 billion to complete the segment and electrify the tracks. In the meantime, the authority plans to run Amtrak trains on the tracks, though there may be problems with that plan, too. Elizabeth Alexis, cofounder of the group Californians Advocating Responsible Rail Design, testified that it's uncertain whether diesel trains could safely run on tracks built for electric trains.

In any event, Federal Railroad Administrator Joseph Szabo insisted that $100 billion is a small price to pay for a modern transportation system and that "adding and maintaining transportation capacity in California, while vital, is expensive." For instance, repairing the Bay Bridge will cost roughly $6 billion; a 10-mile expansion of the 405 freeway will run around $1 billion; and the ongoing modernization of Los Angeles's biggest airport is pegged at $4.1 billion.

So why is a state that is already struggling to finance basic infrastructure initiating an exorbitant project that most taxpayers don't want? None of the witnesses had a good answer.

-- Allysia Finley

HOT Lane Transponders, Congestion as an Advantage, Congestion Pricing, Roadbuilding Costs

A potpourri of interrelated recent articles ...

HOT Lanes are supposed to be free for large carpools, discounted for small carpools and full price for solo drivers. Recall that the purpose of HOT Lanes is twofold: (1) Incentivize Transit and Carpooling and, (2) Have low occupancy vehicles pay congestion insurance (toll). The correct term is not toll but Congestion Insurance because HOT Lanes guarantee over 45 mph speed, whereas common tollways charge a toll and may serve abundant bumper-to-bumper traffic.

The problem is this: HOT Lanes use electronic non-stop no-toll-booth tolling at freeway speeds. So how do large carpools go free, low carpools pay a discounted toll and solo drivers pay the full toll? This article from Orange County shows the electronic solution.

Yogi Berra once said, "nobody goes there anymore. It’s too crowded." In the article The Case for Congestion, John Norquist who served as mayor of Milwaukee from 1988-2004 proposes that congestion is a positive attribute for a city. It shows that a city is vibrant, dynamic and bustling, as opposed to decaying and lethargic.

However, too much congestion puts a lid on the economic growth and long term sustainability of a city, so congestion reduction techniques are always in demand, particularly when they tend to be popular and relatively inexpensive. In A Blueprint for Beating Traffic, Eric Jaffe summarizes the success of Road Pricing in Stockholm, Sweden. Interestingly, some of the road pricing collections are being used by the Swedeish government to build one of the modern under-city roadway tunnels, Södra Länken, to relieve bottlenecks and to facilitate traffic and the economy of the city.

And when it comes to costs, new U.S. roadways cost much much less that new U.S. rail lines, as Randal O'Toole explains in Highway Cost Overruns.

Jitney Advantages for Transit Service

A seriously thought out plan for JITNEY service can have many advantages, in addition to those identified in this article focused on poor and disadvantaged populations. They include:

• Low government cost, mostly for safety and health inspections
• Scalable, from trunk arterial routes to ridges and valleys
• Flexible to reroute as needed by time of day, day of the week, special events
• Congestion reduction by offering fast and competitive service,
• Cost savings to the poorest especially,
• Cost savings to government to target bus routes on high demand routes only
• Creation of a new industry with very low entry costs for self employed.

Google Atlantic City Jitney to read more about one successful deployment of jitneys in the US:

Jitneys are Atlantic City's most convenient and chief mode of affordable transportation around town. The Jitney Association is comprised of 190 individual owner-operated vehicles.

17 Miles in just 78 Minutes!

Humor has an advantage in exposing reality. Here is a story by Reason Foundation on LA's "light" rail.

Pay attention to the factual pop-ups and note that all this inconvenience cost him $5 and another $22 to the taxpayer (for just one 17 mile trip!)

Honolulu Rail is a White Elephant in the Jungle of Transportation Infrastructure

This slideshow explains why the proposed rail is a white elephant in the jungle of transportation infrastructure. Here is a short list of reasons:

1. Honolulu has a severe traffic congestion problem, not a transit problem
2. Honolulu is the most lane deficient medium/large metro area in the U.S.
3. Honolulu's bus is good but is becoming increasingly unproductive due to added low density routes
4. Voters with a tiny 50.6% "yes" margin approved light rail costing well under $5 Billion, not heavy rail costing well above $5 Billion
5. Successful rail systems are networks in multimillion population cities not 20 miles of single line on a corridor of less than 600,000 people
   
6. Proposed rail has an exorbitant cost per mile, per resident and per passenger... 2 to 3 times more than the hugely expensive Washington D.C. metro
7. Ridership forecasts are outright ridiculous and of course the majority of the projected riders are current bus riders; also about one fifth of the riders projected for year 2030 have not been born yet
   
8. Due to its huge construction costs, the proposed rail will absorb transportation funds for decades causing accumulated deterioration to the already mediocre roads and bus operations
   
9. For the price of rail and its foreign and environmentally intrusive technology Honolulu can build enough congestion relieving infrastructure to achieve 20-minute commutes for 75% of its population
10. 95% of Honolulu electric power comes from fossil fuel and thanks to utopian sun and wind policies dependence on oil for power will stay there for a long time
11. Reversible express HOT Lanes is clearly the best solution for Honolulu given the prevailing high Bus and Carpool use rates, and huge AM and PM commuting demand peaks; small trains with a capacity of 300 will do very little to demand peaks and even less off peak
    
12. The path to sustainability for Oahu requires HOT Lanes, Bus Rapid Transit, institutionalized TeleCommuting and expanded Bikeways but none of these are active projects
    
13. Independent macroeconomic analysis has confirmed that the proposed rail has a huge negative surplus (benefits minus costs) over a 40+ year horizon
    
14. Rail is unsustainable as a tax and energy black hole; Oahu has a $40 Billion funding liability and rail is the only discretionary project
15. Adding insult to injury, it is so ugly ... (see slide 21)
    

Jones Act Hurts Alaska and Hawaii

Here is an example of how the Jones Act endangered a community in Alaska. Even in a critical situation like this, the Russian ice breaker could not load oil from an Alaska port and take it to Nome, Alaska, but it had to backtrack to Korea to get the oil and back to Nome, Alaska.

Russian Icebreaker to Make History in Alaska

While Jones Act in general protects the shipping interests of the United States, it has huge implications for states that are dependent heavily on marine transportation, Alaska and Hawaii, and particularly the later. Special shipping interests must be protected even when the health and safety of populations are in jeopardy.

Hawaii's Congressional delegation has been fully unwilling to entertain any modifications to the Jones Act for Hawaii.

Infrastructure projects to fix the economy? Don’t bank on it.

Many good points in this Washington Post guest opinion:

• Even if federal agencies calculate the numbers properly, members of Congress often push ahead with "trash" projects anyway.
• As Morgan noted in his 1971 book, these big projects have often damaged both taxpayers and ecology.
• Taxpayers are double losers from all this infrastructure. They paid to build it, and now they are paying to clean up the environmental damage.
• When the federal government "thinks big," it often makes big mistakes.
• When the federal government is paying for infrastructure, state officials and members of Congress fight for their shares of the funding, without worrying too much about efficiency, environmental issues or other longer-term factors.
• The recent infrastructure debate has focused on job creation, and whether projects are "shovel ready." The more important question is who is holding the shovel.
• The federal government subsidizes the construction of urban light-rail systems, for example, which has caused these systems to spring up across the country. But urban rail systems are generally less efficient and flexible than bus systems, and they saddle cities with higher operating and maintenance costs down the road.

If You Let Them, PB Will Recommend the Right Solution...

... For both transportation and the local economy.

Quote from Washington Post article titled Busway — not light rail — would bring more jobs, money to upper Montgomery, analysis finds: A $772 million light-rail line would generate a total “economic impact” of $1.3 billion between 2014 and 2050, while a $491 million bus rapid transit line would spur $2.2 billion, according to the study by consultant Parsons Brinckerhoff.

Notice that PB is the current consultant for Honolulu. In 2005 Parsons Brinckerhoff were asked by Mayor Hannemann to prove rail is right. Six years earlier the same consultant under much less pressure from Mayor Harris had recommenced Bus Rapid Transit for Honolulu!

Recall that all along I have been saying that HOT Lanes for express buses would solve Honolulu's traffic congestion and construction jobs issues for 1/4 the cost of rail and less than 1/4 the permanent cost later on for operation and maintenance.

Traffic Congestion, APEC, Hurricanes, Tourism, Energy. How Will Rail and HOT Lanes Do for Honolulu?

Here is the LINK to a 2-page handout to inform yourself and your friends about the relative advantages of Rail and HOT Lanes for Honolulu.

Uncertain Funding and Injuctions Are Guaranteed

Meanwhile Senator Inouye expressed doubts to Civil Beat.

At best by 2016 when the senator's term expires rail will be about a quarter done assuming that all efforts to stop it fail. He will be 92 years old.

I doubt that the good senator will be able to provide more than $100 Million per year between now and 2016. This would cover less than 10% of the project's cost. I am surprised that he is copying so much from President Obama who he did not support in 2008. Senator Inouye's audacity of expecting over $1,800 Million of federal support for Honolulu Rail and hope that he will be a senator past age 100 to see them through is quite surprising.

At $100 Million per year starting in 2012 it will take until 2030 for Honolulu to receive a total of $1,800 year-of-expenditure federal funds. At that time Senator Inouye will be 106.

What Would Rail Do for APEC?

The Asia-Pacific Economic Council or APEC 2011 was recently completed at various venues on Oahu. About 20 top leaders attended including the Presidents of US and China and the Prime Ministers of Japan and Australia. It was an important and crowded event. Oahu’s experienced hospitality industry proved that they can handle major visitation challenges.

Oahu’s transportation system was no problem for the “prime” visitors because security forces blocked it off for their exclusive usage. Oahu’s citizens and visitors were inconvenienced from mildly to tremendously because of the lack of redundant routes given that Honolulu is the most lane deficient metro area in the nation.

So a fair question is this: If rail was already present, what would have it done for APEC? What would rail do for future major conventions?

Nothing! Remember that the rail dead-ends at Ala Moana Center. (More on this later.)

Meanwhile, APEC dignitaries and visitors would be appalled by the ghastly superstructure that blighted the waterfront and Ala Moana. Those more akamai would ask: Why did you build something so big for your modest city? Why are your roads so congested and the trains are almost empty?

The answer is that rail was built big to create as many temporary jobs as possible. It’s not well used because the bulk of its ridership comes from deleted bus lines, along with a few thousand white collar workers who soon enough will ask the public to pay more money to put WiFi in the rail cars.

Rail dead ends at Ala Moana Center. Over one billion dollars will be needed to backtrack to Kapiolani Boulevard to get to Waikiki. Rail will permanently blight the Convention Center and the spine of Waikiki: With the elevated rail and stations, sun will barely reach Kuhio Avenue.

Recall that the federal judges signed a letter of objection to the city: They do not want rail to use Halekauwila Street because they consider it a security breech to the nearby federal building. How can rail go by the Convention Center? If it does, Hawaii won't be able to use it for any high-security event such as APEC, ADB, UN and other top level political and business meetings. Or it could, if we installed airport-style security at all 21 stations. Sounds ridiculous? Considering that the powers that be are pushing a $6 Billion rail system on a less than 600,000 population corridor, very little else can top this for ridiculous.

Obviously we need a different and better solution for transportation. What if we had HOT Lanes instead, that is, elevated HOT Lanes between the H1/H2 merge and Iwilei with exits at Aloha Stadium, airport, Kalihi and downtown?

With HOT Lanes, during APEC we would have problem-free travel between the H1/H2 merge and downtown regardless of freeway closures. There would be no visible blight because HOT Lanes run mostly next to H1 freeway and terminate one half mile before Honolulu’s prime waterfront.

As a bonus, HOT lanes have no part in the destruction of Aloun Farms and the prime agricultural land that is slated as a 12,000 - 15,000 residential unit Transit Oriented Development (TOD) in the Ewa plains.

Five Myths about US Gasoline Taxes

A good summary article by Shin-pei Tsay and Deborah Gordon. CNN, November 19, 2011.

There is no doubt that federal gasoline and diesel tax should go to 40 cents per gallon and none of it should be used to fund transit and rail projects.

Honolulu Rail is a Rube Goldberg

Now that the comedy of Honolulu Rail is in full swing I finally found a good metaphor for it. It's a Rube Goldberg. A Rube Goldberg is (by definition) a comically involved, complicated invention, laboriously contrived to perform a simple operation or minimal work!

I must apologize to Rube Godberg's memory because Honolulu Rail also involves copious amounts of sleaze, deceit, corruption and stupidity. Politicians and professionals continue to fail the island constituencies who they are supposed to serve, and they do so for their own enrichment.

Why Does Carlisle / Hamayasu / Horner Stick with Ansaldo while Under so Much Fire?

Edit: Mid. January 2012 u p d a t e.

Samples of recent "fire" from rail advocates:

• Leave no stone unturned before passing rail's point of no return

• Council Chair recommends for rail contract rebid

• Ten ways to transform Italy Number 4, sell off Finmeccanica, parent of Ansaldo Honolulu (My comment... who wants a losing dinosaur?)

Perhaps Carlisle / Hamayasu / Horner are stubborn (or worse...) but their vices alone are hard to justify their glaring lack of responsibility for a $1.4 Billion public contract that they officiate over. There must be something else and it probably has to do with money and corruption.

Another thing that should make us suspicious is that City, HART and Ansaldo plan to sign this contract between Thanksgiving and Christmas, that is, during the time period that the public pays little attention to the news and the media tends to cover "holiday spirit" stories. This is exactly when the Alternatives Analysis was approved in 2006 which cemented the City's choice of "elevated rail" as the Locally Preferred Alternative.

There is no reason for selecting an inferior rail manufacturer that belongs to a troubled company (that wants to sell off its rail business), located in Italy, a country with possibly insurmountable debt problems. With so many qualified and reliable rail manufacturers, why are Carlisle/Hamayasu/Horner sticking with Ansaldo, the most troubled one, and one one of the most complaint-prone? Why would Hawaii source a train in Italy instead of Japan, China or Korea?

Of course FTA's "Buy America" requirement is nothing short of a joke because there is no comparable US manufacturer for passenger trains and rail cars. All of them are wholly owned subsidiaries of foreign manufacturers.

Note that when I wrote the piece on Don Horner copied below, Finmeccanica's stock had crashed to $5. Yesterday it closed down to $3.




-------- Original Message --------

Subject:	Is HART Chair Don Horner Shamelessly Dishonest?
Date:	Fri, 16 Sep 2011 15:07:26 -1000
From:	Panos D. Prevedouros

Why would he say this?

Pacific Business News reported:

Don Horner, chairman of HART’s finance committee and CEO of First Hawaiian Bank, said he was satisfied that Ansaldo’s finances are in order and the city can proceed with negotiating a contract with the firm. He said he it also gave him “strong comfort” to hear Finmeccanica’s commitment to the project.

“Overall, and I can speak as a banker, I was very impressed with the substantial amount of profitability, the liquidity, the history, and the commitment from the parent company,” Horner said. “I am very pleased with the progress that we made today.”

When the truth is this:
http://www.economist.com/node/21525409

WHEN Finmeccanica announced bad results on July 27th, investors strafed its share price, cutting it down by 28% in four days (see chart). In the first half of 2011, excluding a gain from the sale of one of its businesses, the firm made barely any profit: €13m ($18.2m) on revenues of €8.4 billion. Shareholders are spitting fire.

The Italian government holds a 32% stake. That prevents the company from sensibly quitting unprofitable businesses. Meshed together from a ragbag of defence and technology businesses formerly owned by the state’s IRI and EFIM holding companies, Finmeccanica has everything from helicopters to trains to gas turbines. Its former boss, Pier Francesco Guarguaglini, tried to simplify the group down to three areas: aeronautics, helicopters and defence. But the group still owns several businesses that do not fit.

Its biggest problem is AnsaldoBreda, a maker of trains and trams, which has lost more than €1 billion. The government’s unwillingness to allow job cuts makes a solution impossible. Politicians from AnsaldoBreda’s home region in Tuscany objected loudly this week after Finmeccanica’s new boss, Giuseppe Orsi, talked about selling the division. Some 60% of Finmeccanica’s employees are Italian, though the domestic market yields just a fifth of its revenues.

Finmeccanica is used as a dumping-ground for unwanted state assets. In 2008, when the government finally found a solution for Alitalia, the country’s loss-making airline, private investors gobbled up its profitable flight division but curled their lips at its maintenance business, so in 2009 it was sold to another group of Italian firms, with Finmeccanica taking 10%. Politicians have long pushed for a merger with Fincantieri, a troubled shipbuilder also under the government’s thumb. Last September Mr Guarguaglini was obliged to point out that Fincantieri’s activities have little to do with Finmeccanica’s.

....

• Horner is Chair of HART
• HART has an $1.1 Billion contract with Ansaldo
• Ansaldo is owned by Finmeccanica
• Finmeccanica has large debts to BNP Paribas (2nd largest French Bank)
• BNP Paribas owns 1st Hawaiian Bank
• Horner is CEO of 1st Hawaiian Bank

Thanks to Ian Lind for bringing this up: http://ilind.net/2011/09/15/potential-conflict-in-review-of-rail-contractor/

Lessons from US Mainland on How to Ease Congestion and Build Infrastructure

GOAL: Ease traffic congestion that cripples economy and quality of life

SOLUTION: Deliver lanes and tunnels as quickly as possible

LESSONS: US mainland success stories involve private financing and tolls so that infrastructure can actually be done instead of squeezing local taxpayers and depending on broke state and federal coffers.

EXAMPLES
(1) There is plenty monies in private funds: Pension Fund Invests in Florida Toll Project. One of America’s largest pension funds—Teachers Insurance and Annuity Association of America (TIAA) has purchased a 50% stake in Florida’s I-595 concession project, a complete reconstruction of this major freeway, including the addition of three reversible express toll lanes. TIAA purchased the stake from developer/operator ACS Infrastructure Development, which holds a 35-year concession to develop and operate the highway, which is now under construction.
Honolulu application: The level of traffic demand between H-1/H-2 merge and downtown easily justifies a tolled HOT Lanes and mainland investors as well as local pension funds will be attracted to it. (Note that none of them will invest a dime in the rail project.)

(2) Use Public Private Partnerships or PPP: A well-researched and fairly comprehensive overview of long-term concession toll projects appeared in the Oct. 22nd issue of The Washington Post. Written by Cezary Podkul, formerly of Infrastructure Investor, the article discusses a number of recent projects, both large-scale investment in new highways and bridges and the leasing of existing toll roads. It includes the growing involvement of pension funds as investors, and also discusses who won and who lost when a recent start-up toll road filed Chapter 11. (Note: at press time, this piece was available on the Post’s website, but with a very long URL. It’s simpler to just Google the title: “With U.S. Infrastructure Ailing, Public Funds Scant, More Projects Going Private.”)
Honolulu application: State of Hawaii does not have a suitable PPP yet.

(3) Deliver network short-cuts with tunneling: Tunnel Boring Begins for Port of Miami Tunnel. The huge (41-ft. diameter) tunnel boring machine from Germany began digging the first of two parallel tubes for the new Port of Miami Tunnel on Nov. 4, 2011. Each of the two tubes is expected to take six months to drill and line with concrete panels. The $1 billion project is being procured by Florida DOT under a 35-year concession awarded to a team led by France-based Meridiam Infrastructure Partners and Bouygues Travaux Publics.
Honolulu application: A toll tunnel from Iroquois Point to Lagoon drive will save leeward Oahu commuters to town over 30 minutes one way.

(4) Use Congestion Pricing to spread traffic demand: Higher peak-period tolls, and charging half-price (instead of zero) to carpools have reduced congestion and increased speeds on the San Francisco-Oakland Bay Bridge, according to UC Berkeley research commissioned by the Metropolitan Transportation Commission. The biggest impact was that more than half the traffic formerly in the carpool lanes disappeared; officials speculate that some shifted to BART and some changed the time of their commute, and many were probably cheaters who now drive in the regular lanes. The overall reduction in AM peak traffic was about 4%, and time savings varied greatly depending on which approach road people use to get to the bridge and the time (within the peak period) that they travel.
Honolulu application: Both tolls and bus fares need to have peak and off-peak pricing. Use of inexpensive passes should not be allowed for 3-4 peak hours during normal workdays.

Thanks to Robert Poole of the Reason Foundation for these recent examples.

Real and Affordable Green or Misguideded Dream?

Bjørn Lomborg is the author of The Skeptical Environmentalist and Cool It, head of the Copenhagen Consensus Center, and an adjunct professor at Copenhagen Business School. I trust his analyses much more than the "data free" propaganda of the Sierra Club and the Blue Plant Foundation of Hawaii. Here is a summary in his words of his latest assessment titled Seeming Green.

• Danish politicians – like politicians elsewhere – claim that a green economy will cost nothing, or may even be a source of new growth. Unfortunately, this is not true. Globally, there is a clear correlation between higher growth rates and higher CO2 emissions. Furthermore, nearly every green energy source is still more expensive than fossil fuels, even when calculating pollution costs. We do not burn fossil fuels simply to annoy environmentalists. We burn them because fossil fuels have facilitated virtually all of the material advances that civilization has achieved over the last few hundred years.
• Politicians in Denmark and elsewhere argue as if this were no longer true: a transition to a green economy will create millions of new “green jobs.” But, while green-energy subsidies generate more jobs in green-energy sectors, they also displace similar numbers of jobs elsewhere.
• Many politicians are drawn to photo opportunities and lofty rhetoric about “building a green economy.” Unfortunately, the green-energy policies currently being pursued are not helping the environment or the economy. More likely, they will lead to greater emissions in China, more outsourcing to India, and lower growth rates for the well-intentioned “green” countries.

APEC 2011 in Honolulu Ended. Was there a Result?

Yes, although we did not get much information about it in Hawaii. In general, coverage of APEC 2011 in the international press was limited and mostly focused on countries other than the US. There was little or no mention of Honolulu, Hawaii other than as a reference to the location of the meeting. The lack of leis and aloha shirts in official pictures made the exposure of Aloha even more minimal.

The APEC 2011 accomplishment “headline” was the formal initiation of a possible free trade agreement among Pacific nations, which is referred to as the Trans-Pacific Partnership (TPP). This, in turn, put Japan squarely in the middle of the issue and pinned China in a defensive position.

President Obama made even bigger headlines ... in Australia where he announced that WE ARE BACK!

The Economist’s summaries of “We are Back” and of the TPP are informative. See below. We should be following these developments closely because along with expedited visas for tourists from China these have strong implications for Hawaii.

America in the Asia-Pacific - We’re back
America reaches a pivot point in Asia

Nov 19th 2011 | SYDNEY AND WASHINGTON, DC

BORN in Hawaii, raised for some of his childhood in Indonesia, Barack Obama has since his election wanted to be known as America’s first “Pacific President”. Until recently, he has not done much to earn the title. That, Mr. Obama declares, is now changing.

Allies in Asia have complained about only intermittent American attention to their region. But in a speech to Australia’s parliament on November 17th Mr Obama announced that America is back. “Let there be no doubt: in the Asia-Pacific in the 21st century, the United States of America is all in.” It was, he said, a “deliberate and strategic decision”: America was “here to stay”.

Senior administration officials back up the president. They talk of a new “pivot” in foreign policy towards Asia. America will be around to ensure that China’s “peaceful rise” remains just that.

Free trade in the Pacific - A small reason to be cheerful
An inspiring idea to liberalize transpacific trade hinges on the courage of America and, especially, Japan
Nov 19th 2011 | from the print edition

WITH thunderclouds looming over the trans-Atlantic economy, it was easy to miss a bright piece of news last weekend from the other crucible of world trade, the Pacific Rim. In Honolulu, where Barack Obama hosted a summit of Asia-Pacific leaders, Canada, Japan and Mexico expressed interest in joining nine countries (America, Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam) in discussing a free-trade pact. Altogether, the possible members of the Trans-Pacific Partnership (TPP) produce 40% of world GDP—far more than the European Union.

The creation of a wider TPP is still some way off. For it to come into being its architects—Mr Obama, who faces a tough election battle next year, and Japan’s Yoshihiko Noda, who faces crony politics laced with passionate protectionism—need to show more leadership.

Opening up the Pacific
Nov 12th 2011 | TOKYO

MOST Americans have not heard of the Trans-Pacific Partnership (TPP), a free-trade area of countries dotted around the Pacific Ocean. They will soon. The news has electrified the summit of Asia-Pacific Exporting Countries (APEC) convening in Honolulu this weekend. President Barack Obama, who acts as the meeting’s host, hopes the TPP will be the cornerstone of an APEC-wide free-trade area.

There are, however, huge hurdles to overcome in the meantime. Mr Noda’s decision was delayed by a day because of the extent of opposition to trade liberalization within his own Democratic Party of Japan (DPJ), let alone the opposition.

Asia-Pacific trade initiatives - Dreams and realities
A battle over American-led free trade brews in Asia
Nov 12th 2011 | SEOUL AND TOKYO

THE American president is bringing a new—or at least re-warmed—cause to the Asia-Pacific region: free trade. Barack Obama recently signed a ground-breaking free-trade agreement (FTA) with South Korea, after years of Washington foot-dragging. He signed FTAs with Colombia and Panama on the same day. On November 12th-13th the president hosts an Asia-Pacific trade jamboree in Honolulu which, he seems to hope, will give momentum to the idea of a remarkably ambitious free-trade zone at just the time when global trade talks are going nowhere.

Mr Noda will need to convince his counterparts that he has enough domestic support to negotiate in good faith. If he can achieve that, Japan might start a long-overdue push to reform and revitalize its economy. And then the TPP might become more than just another Asia-Pacific acronym that only wonks have heard of.

Mortgage Deduction On the Chopping Block - Big Deal?

The headline reads as follows: Proposal to Limit or Eliminate Tax Deduction for Homes Is Unpopular, Could Raise Billions

There is no doubt that this headline is true on both counts: Unpopular and a Tax Loss for the government. On the opposite side, the mortgage interest tax deduction is Popular with homeowners but is it a big deal?

I set out to answer this for myself in detail using my records. I file separately as head of household with one dependent and I carry a large mortgage in its second year (in 2010), so the effect of a mortgage deduction elimination would be "as big as it gets" in my case.

In the process of estimating all taxes I paid in 2010 I discovered so many hidden charges such as tire disposal fees, and chemical and pollution fees. I do not travel a lot but taxes on hotels, car rentals and airlines are so heavy that they show up clearly.

Also, 2010 was an election year and I run a campaign. My dry clean bill was substantial and I discovered that the actual tax was 10.3% because of the chemical and pollution fees that government has added to the cleaners. The 10.3% includes Honolulu/Hawaii 4.67% general excise tax (GET). So a visit to the cleaners cleans both clothes and wallet!

Utility bills and car fees are vehicles for tax collection and the two of them combined are just as bad as Hawaii's GET which I went at length to calculate from a pile of receipts and statements.

Long story short, my aggregated breakdown of taxes in percentages is shown below, for the actual case with my mortgage and for an estimated case where my $36,000 deduction in mortgage interest was taken away.

It is quite clear that given my total income A, with mortgage deduction in 2101 I paid 0.311A in taxes. If I could no longer deduct mortgage interest then my total tax would have been 0.375A. The difference between the two is substantial and is roughly equal to my 3-year-old's annual day care cost. That's a big deal!

The bottom line is that being in Hawaii without a mortgage interest tax reduction would make me feel quite European. (EU is infamous about its high taxes due to the extensive socialist policies.) Nearly 40% of my middle class income would be lost to taxation.

While the elimination of this deduction may have a small impact in low cost residential markets, it's effects at regions with median housing prices over $300,000 would be significant to the housing and real estate markets, to the taxpayers of those areas and by extension to the general economies of those regions. It would be devastating for the handful of regions with median housing prices over $500,000, and Honolulu is one of them.

Greece Elects a Non-politician as its Savior Prime Minister

Dr. Lukas Papadimos became Greece's Prime Minister on November 11, 2011 through a consensus process that included the ruling socialist party, the opposition conservative party and the President of the Republic.

A member of no political party, Dr. Papdimos is a wise and unusual choice. A physicist and electrical engineer with a doctorate in economics, all from MIT, and professor of economics at Columbia University and the University of Athens. An academic and a numbers man.

Furthermore, Dr. Papadimos has had extensive experience in national banking affairs. Between 1980 and 1985 he worked at the US Federal Bank in Boston. Between 1993 and 2002 he was manager at The Bank of Greece. This was followed by the vice-presidency at the Central Bank of Europe until 2010 when he became financial adviser to the prime minister.

It appears that Dr. Papadimos is "what the doctor ordered" for Greece with its huge banking and debt financing crises. It remains to be seen whether the members of the Greek Parliament will re-orient their thinking around the goal of saving the country as opposed to their petty politicking, service to special interests, and focus on pet regional projects and re-election ambitions. (This may be too much to ask of parliamentarians who consistently did wrong for the country for decades.**)

I can only wish Dr. Papadimos the best of luck, and congratulate him for his bravery to pilot a half-sank ship in the middle of a hurricane.

=======================
(**) As an outside observer with a bit of knowledge of politics I am alarmed by the similarities among the Greek Parliament, the US Congress, and the Hawaii Legislature. Simply put, they keep making the wrong choices time and again, and driving the debt to the Billions and Trillions.

Like in Greece's past, all political "change" in the US and Hawaii has been fake. Until the knife reached the citizens' bones (as it has in Greece.) Although I hope for a big improvement, it may be too late and too painful to return Greece (and the US and Hawaii) to fiscal health and prosperity within a generation.